UL LLC v. Gangsong Group Corp. et al

REPLY in Support of [Docket No. 81] Application of Plaintiff UL LLC For Entry of Default Judgment

C.D. Cal.January 28, 2019

REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 GREENBERG TRAURIG, LLP MATTHEW R. GERSHMAN (SBN 253031) gershmanm@gtlaw.com BREEANNA N. BREWER (SBN 312269) brewerb@gtlaw.com 1840 Century Park East, Suite 1900 Los Angeles, CA 90067-2121 Telephone: 310-586-7700 / Facsimile: 310-586-7800 AMY L. KRAMER (Admitted Pro Hac Vice) kramera@gtlaw.com 1200 17th Street Suite 2400 Denver, CO 80202 Telephone: 303-572-6500/Facsimile: 303-572-6540 Attorneys for Plaintiff, UL LLC UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA UL LLC, Plaintiff, v. Gangsong Group Corp., a California corporation; Flying Medical USA LLC, a California company; Logistic Public Warehouse, a California company; Thomas Soon Chiah, an individual; Shenzhen Kebe Technology Co. Ltd., a foreign company; Jing Hua Zhou, an individual; Shenzhen Leidisi Electronics Technology Co., Ltd., a foreign company; TRC International Corp., a California corporation; Sum Fortune International Group, a California corporation; Defang USA, LLC, a California company; Sun Defang, an individual; ManSeeManWant LLC, an Illinois company; James Ellenberg, an individual; and John Does 1-10, individuals, Defendants. Case No.: 2:17-cv-08166-DSF-E Honorable Dale S. Fischer REPLY IN SUPPORT OF PLAINTIFF UL LLC’S APPLICATION FOR ENTRY OF DEFAULT JUDGMENT Date: February 11, 2019 Time: 1:30 p.m. Courtroom: 7D, First Street Courthouse, 350 W. 1st St., Los Angeles, CA 90012 Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 1 of 18 Page ID #:919 i REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS I. Introduction .................................................................................................................. 1 II. There is no “good cause” to vacate the Ellenberg Defendants’ default. ..................... 2 A. The Ellenberg Defendants’ cannot prove they were not culpable. ................. 2 B. The Ellenberg Defendants lack a meritorious defense. ................................... 6 1. The personal jurisdiction argument is meritless, where the Ellenberg Defendants sold at least $50,000 of hoverboards to California residents and paid a California company to ship hoverboards from the same California warehouse where the L.A. Sheriff’s Office seized holographic labels bearing counterfeit UL Certification Marks. ..................................................... 6 2. The “I didn’t know” argument is meritless, where the Ellenberg Defendants knew they were dealing with disreputable suppliers selling hoverboards far below prices that would be expected had they actually been UL-certified for sale to consumers. ................. 8 C. Setting aside default would prejudice UL. .................................................... 10 III. Default judgment should be entered. ......................................................................... 11 IV. Conclusion ................................................................................................................. 12 Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 2 of 18 Page ID #:920 ii REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Cases Ackra Direct Marketing Corp. v. Fingerhut Corp., 86 F.3d 852 (8th Cir. 1996) ............... 3 American Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104 (9th Cir. 2000) ................................................................................... 2 Burtscher v. Moore, No. 11-cv-02309-DMG-JEMx, 2013 U.S. Dist. LEXIS 190342 (C.D. Cal Feb. 7, 2013) ......................................... 5 BNC Mortg., Inc. v. Causey, No. CV 07-5387-JFW (SSX), 2008 WL 11340260 (C.D. Cal. Apr. 24, 2008) ........................................................ 4 Cassidy v. Tenorio, 856 F.2d 1412 (9th Cir. 1988) ............................................................. 6 Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986) ................................................................ 11 Franchise Holding II, LLC. v. Huntington Restaurants Grp., Inc., 375 F.3d 922 (9th Cir. 2004) .................................................................... 3, 5, 10, 11 Guava Family, Inc. v. Guava Kids, LLC, No. 12-cv-2239-WQH-BGS, 2013 WL 1742786 (S.D. Cal. April 23, 2013) .......................................................... 8 In re Hammer, 940 F.2d 524 (9th Cir. 1991) ....................................................................... 2 Jones v. Phipps, 39 F.3d 158 (7th Cir. 1994) ...................................................................... 4 Louis Vuitton Malletier & Oakley, Inc. v. Veit, 211 F. Supp. 2d 567 (E.D. Pa. 2002) ..... 12 Ringgold Corp. v. Worrall, 880 F.2d 1138 (9th Cir. 2010) ................................................. 4 Rolex Watch U.S.A., Inc. v. Brown, No. 1:01-cv-09155-JGK, 2002 WL 1226863 (S.D.N.Y. June 5, 2002) ........................................................... 12 Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797 (9th Cir. 2004) ........................ 8 Sher v. Johnson, 911 F.2d 1357 (9th Cir. 1990) .................................................................. 8 Sovereign Capital Resources, LLC v. Armstrong Square Ltd. Partnership, 58 F. App’x 335 (9th Cir. 2003) ................................................................................ 6 Terracom v. Valley National Bank, 49 F.3d 555 (9th Cir. 1995) ........................................ 8 Tylor Made Golf Co. v. Carsten Sports, Ltd., 175 F.R.D. 658 (S.D. Cal. 1997) .............. 12 Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 3 of 18 Page ID #:921 iii REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 United States EEOC v. Happy Dog Enters., LLC, No. 07-c-01778-JW, 2008 U.S. Dist. LEXIS 104518 (N.D. Cal. Dec. 15, 2008) .................................... 11 U.S. v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085 (9th Cir. 2010) .................................................................................... 2 Walker v. Gomez, 101 F. App’x 200 (9th Cir. 2004) ....................................................... 3, 4 Statues & Rules Cal. Bus. & Prof. Code § 17500 .......................................................................................... 8 Fed. R. Civ. Proc. 55(c) ....................................................................................................... 2 Local Civil Rule 55-1 ........................................................................................................... 2 Local Civil Rule 55-3 ......................................................................................................... 12 Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 4 of 18 Page ID #:922 1 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. Introduction The eleventh-hour attempt by James Ellenberg and his company ManSeeManWant, LLC (collectively the “Ellenberg Defendants”) to seek relief from entry of default that they have known about for over a year should be rejected. Indeed, the Ellenberg Defendants engaged counsel in January 2018 and even discussed settlement with UL. But those settlement discussions ended in August 2018, after which there was no communication between the parties until now. At the same time, the Ellenberg Defendants knew the lawsuit was progressing according to the schedule set by this Court, which included a January 2019 trial date. (Dkt. 71.) Ultimately, UL settled just before trial with the only defendants that appeared, and this Court then ordered UL to file its application for default judgment as to the rest. (Dkt. 79.) UL did so, in compliance with this Court’s order, and only thereafter did the Ellenberg Defendants “specially” appear. It is too late now. The Ellenberg Defendants cannot—at this eleventh hour—carry their burden to show all three “good cause” factors to relieve them of the default they knew about since at least January 2018. First, the Ellenberg Defendants cannot prove they were not culpable. Indeed, they knew since January 2018, when they engaged counsel, what their recourse was if they wanted to obtain relief from default and then appear and defend this case. Rather than do so, they pursued settlement talks, which stalled and ultimately ceased in August 2018. At the same time, they intentionally sat on the sidelines, hoping that the defendants who appeared in this case would accept their indemnity demand and provide a defense. When that was refused in March 2018, the Ellenberg Defendants still did nothing, allowing this action to run its full course. They are culpable for their situation. Period, full stop. Second, regardless, the Ellenberg Defendants have no meritorious defense. Instead, they offer a baseless jurisdictional argument and an empty claim that “they didn’t know” what they were doing was wrong. As shown below, jurisdiction lies in California, and the Ellenberg Defendants’ own testimony and documents sink their claim of ignorance. Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 5 of 18 Page ID #:923 2 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Third, the Ellenberg Defendants cannot show lack of prejudice to UL, which diligently pursued this case against those who appeared, and which has been patiently awaiting judgment against those who did not appear, including the foreign manufacturer defendants, against whom UL needs the default judgment to protect its trademarks and consumer safety. Simply, a defendant cannot knowingly sit out the entire case and then, only after the other defendants to have appeared settled just prior to trial, try to appear and contest the case on the merits. In short, the Ellenberg Defendants have no “good cause” to set aside the default. Furthermore, the Ellenberg Defendants do not seriously contest that all procedural requirements of Local Civil Rule 55-1, as well as all substantive considerations for entry of default judgment, are met here. For all these reasons, the Court should grant UL’s application and enter default judgment, including against the Ellenberg Defendants. II. There is no “good cause” to vacate the Ellenberg Defendants’ default. Setting aside entry of default requires a showing of “good cause.” Fed. R. Civ. Proc. 55(c). In evaluating whether good cause exists, the Court considers three factors: “(1) whether [the party seeking to set aside the default] engaged in culpable conduct that led to the default; (2) whether [it] had [no] meritorious defense; or (3) whether reopening the default judgment would prejudice the other party.” U.S. v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010). The party seeking to set aside an entry of default bears the burden of demonstrating that all three factors are satisfied. In re Hammer, 940 F.2d 524, 526 (9th Cir. 1991) (affirming denial of motion to vacate default where defendant’s own culpable conduct prompted default). Put another way, “this tripartite test is disjunctive,” meaning that the court is free to deny the motion if any of the three factors is true. American Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000). A. The Ellenberg Defendants’ cannot prove they were not culpable. In the Ninth Circuit, “[i]f a defendant ‘has received actual or constructive notice of the filing of the action and failed to answer,’ its conduct is culpable.” Franchise Holding Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 6 of 18 Page ID #:924 3 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 II, LLC. v. Huntington Restaurants Grp., Inc., 375 F.3d 922, 926 (9th Cir. 2004). Here, the Ellenberg Defendants have only themselves to blame for being in default, for there is no dispute that they were served but never answered or otherwise responded to the Complaint. (See Dkt. 83-1, Ellenberg Decl., ¶ 3 (admitting he was served with process).) Thus, the Ellenberg Defendants are culpable. Unable to refute the fact that they were put on notice and still failed to answer, the Ellenberg Defendants now claim that they thought they responded to the Complaint when they sent a letter to UL’s counsel. But even a cursory review of that letter shows it was not an answer, nor responsive pleading, nor was it even filed with the Court. (Dkt. 83-1, Ex. A.) Putting it charitably, the letter was an attempt to privately settle out of court, by requesting UL dismiss them from the case in exchange for Ellenberg “offer[ing] some solutions to help [UL] locate many more warehouses doing similar types of fraud.” (Id.) As the Ellenberg Defendants know, UL did not accept. To the contrary, UL cautioned on multiple occasions that the Ellenberg Defendants should instead retain an attorney. (See Kramer Reply Decl. ¶ 2, Exh. 9 (“First, we reiterate that you should retain an attorney to assist you in this matter and to represent you at your deposition.), Exh. 10 (“And, we reiterate that you should retain an attorney to assist you in this matter and to represent you at your deposition.”).) In fact, UL even cautioned Ellenberg that “default could be entered against [him] for failing to answer the complaint.” (Id. ¶ 3, Exh. 11.) Thus, the Ellenberg Defendants were fully on notice of what was going on, and how serious it was. Notwithstanding these express warnings, the Ellenberg Defendants allowed default to be entered and did not hire counsel until after entry of default. (Dkt. 83-1, ¶ 30.) But proceeding pro se and not timely hiring counsel is not a valid excuse for failing to comply with the Rules of Civil Procedure. See, e.g., Ackra Direct Marketing Corp. v. Fingerhut Corp., 86 F.3d 852, 856-57 (8th Cir. 1996) (affirming default judgment against appellants, who failed to timely engage new counsel, and holding “[a]ppellants’ attempt to hide behind their pro se status is equally unavailing” and “does not excuse a party from complying with … the Federal Rules of Civil Procedure.”); see also Walker v. Gomez, 101 F. App’x 200, Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 7 of 18 Page ID #:925 4 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 202 (9th Cir. 2004) (“Pro se civil litigants are not excepted from court-ordered deadlines.”); BNC Mortg., Inc. v. Causey, No. CV 07-5387-JFW (SSX), 2008 WL 11340260, at *2 (C.D. Cal. Apr. 24, 2008) (affirming default judgment and holding “pro se litigants ‘are not entitled to a general dispensation from the rules of procedure or court imposed deadlines’” (quoting Jones v. Phipps, 39 F.3d 158, 163 (7th Cir. 1994)). For example, in BNC Mortgage, supra, 2008 WL 11340260, at *2, this court held the defendant was culpable in allowing his default to be entered—notwithstanding his pro se status—because, he “clearly had notice of [the] action and that Plaintiff’s counsel was moving forward with the litigation,” and, “[i]n addition to being served with the Complaint,” he “talked to Plaintiff’s counsel … on multiple occasions” and was told by the plaintiff’s counsel that “his default would be taken if he failed to respond to the Complaint.” The same is true here, where Ellenberg was clearly on notice of the action, knew it was proceeding when UL did not accept his “offer” to help in exchange for dismissing him, knew he was being deposed, was told by UL’s counsel to engage his own lawyer, and was warned by UL’s counsel that default would be entered if he failed to respond to the Complaint. Thus, as in BNC, the Ellenberg Defendants are culpable. Furthermore, the Ellenberg Defendants’ conduct after entry of the default confirms their culpability. Namely, despite being on notice of the default for over a year, and despite having retained counsel since January 2018, the Ellenberg Defendants did nothing to appear in this case. Instead, they continued to try to settle the case, but those settlement talks were frustrated by incomplete and/or nonresponsive document productions by the Ellenberg Defendants, and, ultimately the settlement talks ended in August 2018 after UL rejected what it viewed as a bad-faith offer. (Dkt. 81-1, Gershman Decl., ¶¶ 4-6.) The Ellenberg Defendants then remained silent for approximately five months until now, despite the fact that they had a duty to keep track of the progress of this lawsuit, which continued according to this Court’s scheduling order toward a then-scheduled January 2019 trial date. See e.g., Ringgold Corp. v. Worrall, 880 F.2d 1138, 1141-42 (9th Cir. 2010) (affirming default judgment based on defendant’s “repeated failure to attend pretrial Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 8 of 18 Page ID #:926 5 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 conferences, otherwise participate in or remain informed about the litigation…[and failure] to attend…the first day of a trial schedule months before”). In such circumstances, the Ninth Circuit holds default judgment is appropriate, where, as here, settlement talks with defaulted defendants break down, and yet the defaulted defendants do nothing to appear in the case despite being on notice that the case was proceeding. See Franchise Holding II, LLC., 375 F.3d at 925, 928. In fact, this Court has denied relief from default in circumstances where defendants stayed quiet for even less time. See, e.g., Burtscher v. Moore, No. 11-cv-02309-DMG- JEMx, 2013 U.S. Dist. LEXIS 190342, at *9 (C.D. Cal Feb. 7, 2013) (denying motion to set aside default where, “despite being on notice of the possibility of default as early as July 19, 2012, Defendant Moore failed to file the instant Motion until October 5, 2012, nearly three months later”). Cementing their culpability, the evidence shows the Ellenberg Defendants made a calculated decision to sit on the sidelines. Namely, back on March 15, 2018, the Ellenberg Defendants sent an indemnification demand to counsel for the Gangsong Defendants, who appeared in this case and subsequently settled with UL. (Kramer Reply Decl. ¶ 4, Exh. 12.) But the Gangsong Defendants refused that demand (id., Exh. 13), and still the Ellenberg Defendants did nothing to appear and defend in this case in the more than nine months that since followed. Ultimately, the only possible outcome of their ignoring this ongoing lawsuit was an eventual application for entry of default judgment by UL. Indeed, in December 2018, UL stated that it would be applying for default judgment against all defaulted defendants (Dkt. 78). The Court then ordered UL to file such a motion by January 7, 2019 (Dkt. 79), and UL complied (Dkt. 83). The Ellenberg Defendants are culpable, and thus have no “good cause” to set aside the default and send this action—after more than a year of litigation— all the way back to the start. Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 9 of 18 Page ID #:927 6 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. The Ellenberg Defendants lack a meritorious defense. While the Ellenberg Defendants’ culpability is sufficient justification by itself for refusing to set aside the default, the Ellenberg Defendants also have not met their burden to produce competent evidence that establishes a factual or legal basis for a meritorious tendered defense. See Cassidy v. Tenorio, 856 F.2d 1412, 1416 (9th Cir. 1988) (holding allegations are “insufficient to make out a colorable claim to a meritorious defense”); Sovereign Capital Resources, LLC v. Armstrong Square Ltd. Partnership, 58 F. App’x 335, 336 (9th Cir. 2003) (holding a defendant’s belief that he or she had a defense is not enough). Specifically, the Ellenberg Defendants offer only one argument to defend against all counts, and then a second to defend against one state law claim. Neither has merit, but rather they both are undone by Ellenberg’s own admissions and documents. 1. The personal jurisdiction argument is meritless, where the Ellenberg Defendants sold at least $50,000 of hoverboards to California residents and paid a California company to ship hoverboards from the same California warehouse where the L.A. Sheriff’s Office seized holographic labels bearing counterfeit UL Certification Marks. The Ellenberg Defendants’ own admissions and documents show they purposefully directed their activities at California and consummated transactions within California. For example, Ellenberg admits that he has directly sold and shipped “approximately 200” hoverboards to California residents. (Dkt. 83-1, Ellenberg Decl. ¶ 21). Based on the sales revenue documents produced by the Ellenberg Defendants, the 200 sales alone yielded $50,000 in revenue from California residents. (See Kramer Reply Decl. ¶ 5, Exh. 14.) The evidence also shows that the Ellenberg Defendants received at least three separate shipments of hoverboards from California around March 15, 2017, April 14, 2017, and June 16, 2017. (Kramer Reply Decl. ¶ 7, Exhs. 15-17.) Another defendant, Sum Fortunate Int’l Group Inc. (“Sum Fortune”), issued invoices for each of those shipments to ManSeeManWant LLC, and specifically addressed them to the attention of Ellenberg. Id. Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 10 of 18 Page ID #:928 7 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Ellenberg also wrote checks totaling at least $2,730 from ManSeeManWant’s bank account to Sum Fortune for each of these shipments. (Kramer Reply Decl. ¶ 7, Exhs. 18-19.) To be sure, although Ellenberg now conveniently claims he never knew the location from where he was sourcing goods for sale, that is false. He previously testified in deposition that he did know he was dealing with suppliers in California: When [“Leslie”] refers to my LA warehouse or my staff over there, I think he is referring to [Sum Fortune] and their business relationship, whatever that may be, at least as far as stuff that has been sent from LA. I do actually recall when I had asked him [Leslie] about or when I confronted him about the lawsuit and saying hey, your people sent me, you know, could have, you know, potentially sent me something that had been counterfeited, he said, his response was we just started working with that warehouse or something along those lines….I think that he has sent me products from multiple warehouses in California at different times…I thought that I had seen one from San Diego before the – so in California is what I –multiple in California.” (Kramer Reply Decl. ¶ 2, Exh. 20 (Ellenberg Depo. at 125:5-126:19) (emphasis added).) Likewise, each of the invoices to him for hoverboard shipments listed Sum Fortune’s address in South El Monte, California, and described the cargo as originating from South El Monte or Santa Fe Springs, California. (Kramer Reply Decl., Exh. 15) (“FROM TRC EL MONTE, CA 91731 4 PLTS COMMODITY: SCOOTER”); (id.., Exh. 16) (“FROM TRC EL MONTE, CA 91731 4 PLTS 4980 LBS SCOOTER”); (id., Exh. 17) (“FROM: TRC SANTA FE SPRINGS, CA 90670 5 PLTS (200 CS) SCOOTERS”.) Of course, the Ellenberg Defendants know this, as Ellenberg signed the proof of delivery for each of these shipments. Id. at ¶ 7 Exhs. 21-23. This is how the Ellenberg Defendants conducted their business unlawfully, in that, this same Santa Fe Springs warehouse is where the Los Angeles County Sheriff’s Department seized the 2,325 holographic labels bearing counterfeit UL Certification Marks. (See Dkt. 14-3, Decl. of Kevin Olive ¶ 9). In short, the Ellenberg Defendants cannot defeat the purposeful-direction prong of the specific jurisdiction test, where they admittedly sold over $50,000 of hoverboards to California residents, consummated multiple transactions with Sum Fortune (a California Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 11 of 18 Page ID #:929 8 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 company) for hoverboard shipments, and received shipments of hundreds of hoverboards from California (indeed, from the same California warehouse where the L.A. Sheriff conducted its raid that gave rise to this case). See, e.g., Guava Family, Inc. v. Guava Kids, LLC, No. 12-cv-2239-WQH-BGS, 2013 WL 1742786, at *5 (S.D. Cal. April 23, 2013) (denying motion to dismiss for lack of personal jurisdiction where defendant had “significant direct sales into California amounting to 4.35% of its total revenues (estimated at approximately $4800.00)”). Next, but for the Ellenberg Defendants’ California-specific activities, UL could not assert its California state law claims and would not have been injured in California by sales of hoverboards bearing counterfeit UL marks. Thus, this action arises out of the Ellenberg Defendants’ contacts with California, thereby satisfying the “forum-related-activities” prong of specific jurisdiction. See Guava Family, Inc., supra, 2013 WL 1742786, at *7-8; see also Terracom v. Valley National Bank, 49 F.3d 555, 561 (9th Cir. 1995). Finally, the Ellenberg Defendants present no “compelling” argument that the exercise of jurisdiction in California would not be reasonable. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). Nor could they, because they purposefully directed activities in California, making “personal jurisdiction … presumptively reasonable.” Sher v. Johnson, 911 F.2d 1357, 1364 (9th Cir. 1990); see also Guava Family, Inc., 2013 WL 1742786, at *8 (reasonable to exercise jurisdiction in California where defendant sold products with allegedly infringing trademark in California and shipped goods to California). Simply, there is no meritorious jurisdictional argument. 2. The “I didn’t know” argument is meritless, where the Ellenberg Defendants knew they were dealing with disreputable suppliers selling hoverboards far below prices that would be expected had they actually been UL-certified for sale to consumers. While lack of knowledge and intent is a defense only to UL’s state law claim under §§ 17500 et seq., the Ellenberg Defendants’ conclusory “I didn’t know” claims are easily refuted by the evidence. To illustrate, Ellenberg was very familiar with the difference in Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 12 of 18 Page ID #:930 9 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 wholesale prices associated with UL certified hoverboard products versus those that were uncertified, such as the products he purchased from the co-defendants, which products were not UL certified. (Kramer Reply Decl., Exh. 20, Ellenberg Depo. at 41:10-15 (prices higher for UL certified hoverboards.); see also id. at 190:13-191:3 (“the one with the UL certificate would be a higher price typically.”)) And, while the Ellenberg Defendants now assert they “paid a premium for certified goods” (Dkt. 83 at 2 and 10; Dkt. 83-1, Ellenberg Decl. ¶ 24), that claim is undone by their own document production. Namely, their documents show they paid their supplier—known as “Leslie”—only $150 per hoverboard, which is one-third less than the $230 price that Ellenberg paid for UL certified boards from a different supplier known as “Koolwheel/Jomotech.” (Kramer Reply Decl. ¶ 6, Exh. 24 MSMW0179 and MSMW0362). Further illustrating the point, Ellenberg had an ongoing business relationship with “Leslie” since 2016 and knew that he was not dealing with a conventional distributor and manufacturer, knew that the prices he was paying were significantly less than those associated with typical UL certified products, and knew that he was being directed to make payments through unconventional channels, namely wire payments to various personal accounts. (See, e.g., id., Exh. 20, Ellenberg Depo. at 186:12-187:6.) Also, on multiple occasions, Ellenberg called his supplier “Leslie” a fraud for filling orders with damaged and/or used hoverboards and failing to deliver other orders on time, or at all. (See e.g., id., Exh. 24 at MSMW0137 (“That is why I use other suppliers for drop shipping. I can trust their products.”), MSMW0140 (“My credit card processor stopped accepting payments on my website yesterday because they think I am a scam too...You sound like a liar.”), MSMW0343 (“I called UPS about 1 hour ago. I told him what you are telling me. He laugh [sic] out loud and called you a liar…What proof do you have that says you are telling me the truth? Because I don’t believe you.”), MSMW0343 (“It sounds like you think that my business is a fucking joke, and I’m a joke and I will just take these lies and roll over. Is that what you think?”), MSMW0345 (“This isn’t from UPS. This is Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 13 of 18 Page ID #:931 10 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 fraud. This is fake letter.”).) Ellenberg even threatened to sue “Leslie,” and accused “Leslie” of not being honest: [I]n your professional business life you are greatly lacking in virtue my friend. I don't mean that to be mean or harsh. But you make promise after promise to your so called business partners like me, and you have no intention or ability to deliver on your promises. I always try to trust you. Try to trust someone I never met that is on the other side of the world and make a business partner with you.... but you never, ever deliver your promises. I want you to give me a reason that I should give you so much trust.... one good reason....Because if someone in the USA screwed me over the way you did in August, I would have already filed a lawsuit and won my money back, with damages. My company and business partners, and attorney wants me to go after you for things like this.... I want you to stop fucking around with me and be honest. (Id., Exh. 24 at MSMW0338-39.) In short, Ellenberg knew who he was dealing with, knew the difference between certified and uncertified pricing, knew he was paying the uncertified pricing, and knew his supplier wasn’t trustworthy, to boot. The “I didn’t know” claim is meritless.1 C. Setting aside default would prejudice UL. Setting aside a default is prejudicial where “the plaintiff’s ability to pursue his claim will be hindered.” Franchise Holding II, 375 F.3d at 926. Here, this case is more than a year old already. UL diligently litigated against the only defendants to have appeared. Meanwhile, the Court was previously unwilling to enter default judgment against the subset of defendants who did not appear, until such time that the entire case could be resolved. (Dkt. 67). Now is that time, but if the Ellenberg Defendants’ default is lifted, that would send this case back to square one, suggesting that UL would have to settle with Ellenberg or otherwise litigate for another year just to get to this point again when it can 1 Also, to be sure, Ellenberg’s claim that the U.S. C.P.S.C. allegedly blessed his business’s hoverboard stock (Dkt. 83 at 2 and 10) is false and contradicted by his own testimony. Namely, in his deposition, Ellenberg admitted that he did not know if the inspector verified the authenticity of the UL Certifications. (Kramer Reply Decl., Exh. 20, Ellenberg Depo. at 92:21-25 (Q: “And was he, was the inspector looking to make sure that each of your boards were UL 2272? A: “I don’t know exactly what he was looking for.”).) Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 14 of 18 Page ID #:932 11 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 seek default judgment against the remaining defendants. That means the entire past year of litigation would have been wasted, which is prejudice enough justifying denial of relief from default. See, e.g., United States EEOC v. Happy Dog Enters., LLC, No. 07-c-01778- JW, 2008 U.S. Dist. LEXIS 104518, at *7-8 (N.D. Cal. Dec. 15, 2008) (denying motion to set aside default judgment where defendant waited over a year to file its motion, by which point, the court held, “[i]f the Default Judgment is set aside, the resources Plaintiff expended in litigating this action for seventeen months will have been wasted.”). Likewise, every day that passes allows the other defendants to escape answering for their counterfeiting and to perpetuate their unsafe practices that put consumers at risk, because UL is unable to enforce against them. Any further delay in judgment also would allow the defaulted defendants to move and hide assets, the mere possibility of which has been held by the Ninth Circuit to support a finding of prejudice sufficient to deny relief from default. Franchise Holding II, LLC., 375 F.3d at 926-27. For all these reasons, setting aside the default would prejudice UL. III. Default judgment should be entered. Because the Ellenberg Defendants fail to establish a single “good cause” factor, let alone all three, the Court should enter default judgment. To that end, UL’s moving papers demonstrate that the relevant Eitel factors, many of which the Ellenberg Defendants’ Opposition does not to dispute, are satisfied: (1) UL’s well-pled allegations of each count are deemed true; (2) the money at stake is substantial; indeed, the Ellenberg Defendants’ do not dispute that the retail value of the quantity of counterfeit UL certifications, if genuine, would be over $580,000; (3) UL would suffer prejudice, as detailed above, if default judgment is not entered; (4) as a result of entry of default, there is no possibility of a dispute concerning material facts; (5) as detailed above, default was not due to excusable neglect but rather to the Ellenberg Defendants’ culpable behavior; and (6) the policy of deciding cases on the merits, on its own, cannot suffice to prevent entry of default judgment; to that end, the Ellenberg Defendants had a year to set aside the default and defend this case on the merits, but chose to do nothing. Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 15 of 18 Page ID #:933 12 REPLY IN SUPPORT OF ENTRY OF DEFAULT JUDGMENT BY THE COURT CHI 69851481v2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 As for the amounts, the Ellenberg Defendants argue, without evidence, that an award of attorneys’ fees is not appropriate because “there was no malicious, fraudulent, deliberate or willful conduct on the part of the Ellenberg Defendants.” (Dkt. 83 at 15). But, aside from the fact that the Ellenberg Defendants do not dispute that UL correctly calculated the requested fees under Local Rule 55-3, the law provides that, in cases like this, where the defendant does not appear, it is an exceptional case warranting attorneys’ fees. See Tylor Made Golf Co. v. Carsten Sports, Ltd., 175 F.R.D. 658, 663 (S.D. Cal. 1997) (“Additionally, a case may be considered ‘exceptional’ where the defendant disregards the proceedings and does not appear.”). Similarly, the Ellenberg Defendants, in a passing reference in their Conclusion, seek to limit statutory damages to $1,000. (Dkt. 83 at 12). But that request is unsupported by any evidence, and no reasoned basis is even offered. And, regardless, as detailed in UL’s Application, the request for $2,000,000 in statutory damages is appropriate given the willful infringement of UL’s certification marks, the need for deterrence, and the serious safety implications of Defendants’ unlawful activities. (Dkt. 81 at 16-19.) None of this is disputed with actual evidence. In any event, UL is not requesting the statutory maximum of $8,000,000, but rather proposes the same approach used by other courts in this situation.2 IV. Conclusion UL’s application should be granted in full. Respectfully submitted, DATED: January 28, 2019 GREENBERG TRAURIG, LLP By: /s/ Matthew R. Gershman 2 See, e.g., Louis Vuitton Malletier & Oakley, Inc. v. Veit, 211 F. Supp. 2d 567, 584 (E.D. Pa. 2002) (“In similar cases concerning multiple marks, courts have been inclined to either award the maximum without multiplication or to lower the per mark award.”); see also Rolex Watch U.S.A., Inc. v. Brown, No. 1:01-cv-09155-JGK, 2002 WL 1226863, at *2 (S.D.N.Y. June 5, 2002) (magistrate judge recommending a default judgment of a $1 million statutory damage award—the maximum at the time, per statute, without multiplication for multiple infringed Rolex marks), magistrate judge’s recommendation adopted, PACER Dkt. No. 16 (Sept. 16, 2002). Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 16 of 18 Page ID #:934 Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 17 of 18 Page ID #:935 Case 2:17-cv-08166-DSF-E Document 84 Filed 01/28/19 Page 18 of 18 Page ID #:936